Lightning eMotors, Inc

Good morning. Welcome to Lightning eMotors' fourth quarter 2022 earnings call. At this time, all participants are in a listen-only mode. A question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. As a reminder, this conference is being recorded. I would now like to turn the conference over to your host, Mr. Brian Smith, Vice President, Investor Relations for Lightning eMotors. Thank you. You may begin.

Thank you, Operator, and thanks for joining us. On the call today are Lightning's co-founder and CEO, Tim Reeser, Chief Revenue Officer, Cash Sethi, and CFO, David Agustin. Ahead of this call, Lightning issued our fourth quarter 2022 earnings press release and presentation deck, which we will reference today. These can be found on the investor relations section of our website at lightningemotors.com. On this call, management will be making statements based on current expectations and assumptions, which are subject to certain risks and uncertainties. Actual results could differ materially from these forward-looking statements due to risk factors that are listed in today's earnings release and in our filings with the SEC, which can also be found on our website. We assume no duty to update any forward-looking statements except as required by law. Today's presentation also includes non-GAAP financial measures. Please refer to the information contained in today's earnings press release for definitional information and reconciliations of non-GAAP measures to the comparable GAAP measures. With that, let me turn it over to Tim.

Thank you, Brian, and thanks to everyone for joining us today. I'll start off on slide four with today's agenda. I will begin with an overview of Lightning, some highlights from the quarter, a discussion of our progress on managing our supply chain, and a discussion of the narrowing of our product focus. Cash will then provide an update on products, markets, and incentives, and David will wrap up with a financial overview. Moving to slide five, a summary of the quarter. Lightning produced a record 128 vehicles and powertrains in the fourth quarter, 23% higher than our previous record of 104 achieved in Q3. As we announced in January, revenue in the quarter was impacted by quality issues with Romeo batteries, plus customer financing delays and the timing of incentives. Next, we will discuss our view of market forces and momentum, and our refined product development focus on certain segments and applications most favored by government incentives, and where we currently have a competitive advantage. Specifically, Class IV trucks and buses, plus the Lightning Mobile DC Fast Charger we just introduced. And finally, we'll discuss how this narrowing of our focus will allow us to reduce our expenses and cash burn. Moving to slide six, we offer a full range of fleet electrification solutions, from vehicles and service to powertrain technology, repowering of pre-owned ICE vehicles, energy solutions for fixed and mobile charging, including installation and support, and finally, our Lightning Insights telematics and analytics offering, which provides fleet intelligence, including driving efficiency, charging optimization, and predictive maintenance. Moving to slide seven, let's discuss the supply chain landscape. On the chassis side, our work with GM is providing a sufficient and predictable supply of chassis to serve our targeted market segment of class four trucks and buses. The GM chassis is preferred by most type A school bus providers, and we are currently the only OEM with an electrified solution on this platform. Plus, our progress on our purpose-built Lightning E chassis is very exciting, as we will begin initial testing in the first half of this year and volume production next year. On the battery front, we have sufficient quantities of high quality batteries from Proterra and CATL for our near-term needs. I will discuss the Romeo battery issue shortly. Beyond chassis and batteries, we continue to work to diversify our supply chain with new, higher production, and lower cost suppliers to help reduce the cost and lead times we are seeing for components such as high voltage heaters, high-voltage air conditioners and heat pumps, and thermal management parts. Turning to slide eight, Lightning has been working closely with multiple battery pack suppliers for the last six years, as our broad range of applications and customizations require multiple battery suppliers, configurations, and technical specifications. Many early battery pack suppliers struggled with quality and availability, and vehicle OEMs and their customers have had to work our way through that. Lightning has built a significant field service team, both internally and through partners, to manage the early challenges. We are having excellent success now with our current battery suppliers, Proterra and CATL, and in fact have built a proprietary safety system on CATL PACS, in partnership with CATL, for commercial vehicle applications. We are actively analyzing, testing, and validating new battery suppliers to meet our requirements, which include best-in-class safety systems Buy America compliance, modular support and fit for a wide variety of chassis configurations, and best-in-class energy and power density. Turning to slide 9, in January, we announced revenue constraints in Q4 due primarily to defects we identified in the Romeo batteries. While we expected Romeo and its parent company, Nikola, to support us and our customers and honor the warranty obligations, as they publicly stated they would, they are not. We filed suit against Nickel and Romeo on March 9th. This battery issue directly and significantly impacted Q4 revenue and is expected to impact our revenues in Q1 and Q2 of this year as we lost planned sales of our legacy Class 4 40-450 base platform. Looking forward, our new line of products, including all our GM-based Class 4 products and our Lightning Mobile DC Fast Vehicle Charger, all use high-quality batteries from Proterra CATL, of which we have more than ample supply. We are working with customers to convert our backlog of orders for the legacy Class IV platforms that had Romeo batteries to the new GM platform with Proterra batteries. While we are having some success and are optimistic given what we are currently seeing with the performance of the platform, we may not be able to replace all these orders, and this process is likely to impact the amount and timing of our revenue for the first half of the year. Turning to slide 10. Early on, our product development strategy prioritized optionality as we waited for more clarity on the market and the regulatory landscape. That clarity has arrived, and fortunately, the landscape now favors a market segment where we have an advantage in terms of both experience and the investments we've recently made. The Inflation Reduction Act is driving market momentum for Class 4 vehicles. The $40,000 IRA incentive on Class 4 and above is leading to strong demand for Class 4 school buses, shuttle buses, and work trucks. School buses are seeing particularly strong momentum in terms of both incentives and public sentiment. We will continue to participate in a Class 3 business with a focus on passenger vans and ambulances and focusing less on last mile delivery. Our Class 3 platforms are already designed, and where it makes sense, we will produce vehicles and capitalize on the investments we've made. We will also focus on our Lightning Mobile DC Fast Charger, which we unveiled last month, and for which we are already taking orders. This can be a game-changing product, especially for customers wishing to electrify their fleet, but who are experiencing delays in getting fixed charging installed. With this more focused product development and market strategy, we believe we can now lean out our expense base without sacrificing growth potential, which David will go into a little later. Turning to slide 11, which summarizes our product development focus for this year. Class 4 buses and trucks built on the GM platform with Proterra batteries and an optimized next-generation powertrain, plus the mobile charger I spoke of. While the supply chain environment remains dynamic, we are not currently supply-limited for components to build these products. We have delivered our first GM Class 4 vehicles to customers, and the customer response has been positive. The platform rollout should continue in Q2 with a strong expected ramp in the second half of the year. Initial customer response to our mobile charger has also been positive. I'm excited about this product and its prospects and proud of our development team for the job they've done because this product can be an electrification bridge for our customers as they build out a procure fixed charging capability to meet their charging needs. Although we expect the sales cycle to be a little slower given the newness of the product and the high ASP, we are working to accelerate it by helping customers rent or lease the product through our finance and lease partners. Turning to slide 12, you can see how the new North America and U.S. incentive programs stack up to provide very significant opportunities for customers to buy lightning electric commercial vehicles at a much lower investment, de-risking the purchase and allowing them to electrify their fleets at a much faster pace. Most of these programs have launched in the last six months, so we believe the ability to stack these incentives will result in a demand inflection in the near term, as customers align their purchasing plans with these new incentives. Turning to slide 13, you can see the current competitive landscape. Although there's been a lot of noise, we show here that there's little actual competition in the key markets we are focusing on. It is also important to note that many of the products listed from competitors are likely not design complete or on the road yet. We believe that we are well ahead of the competition with our completed designs and real-world miles. Note that we believe we are the only EVOEM today with an electrification solution for ambulances and Class III passenger shuttles. And now I'll turn it to Kash to provide an update of our products, markets, sales momentum, and a look at how the incentives are stacking up to drive market acceleration.